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BMW: Built-to-Order Only (your next car)

BMW Tries to Convert ‘Impulsive’ Americans to Orders

May 14 -- Bayerische Motoren Werke AG is renewing its push to convince U.S. consumers that a built-to- order vehicle is worth the wait, challenging Americans’ penchant for instant gratification.

The world’s largest maker of luxury cars will introduce a new X3 sport-utility vehicle early next year. Before the launch, BMW is preparing to get dealers on board to help promote options such as a $185 iPod adapter and a $1,350 panoramic moonroof.

Built-to-order vehicles, which can help manufacturers reduce costly inventory and ward off discounting, are rare in the U.S., with Toyota Motor Corp.’s Lexus saying 2 percent of its monthly deliveries are pre-ordered. In Germany, every other BMW sold is customized. BMW’s effort to change this trend may run into cultural and competitive hurdles, said Jeremy Anwyl, chief executive officer of U.S. automotive Web site Edmunds.com.

“Ordering has not been part of the car buying process” in the U.S., Anwyl said in a telephone interview. “Consumers are used to going into a dealership and driving away with a car. We tend to be very impulsive.”

With a shift of the X3 model’s production from Austria to Spartanburg, South Carolina, buyers can pick up their cars in as few as two weeks after the order, BMW said.

BMW is looking to rebound in the U.S. after deliveries in the country fell 20 percent to 242,000 vehicles last year in the aftermath of the financial crisis. The slump led to Germany surpassing the U.S. as the company’s biggest market.

Advance Orders

To overcome U.S. consumers’ resistance to pre-ordering, BMW is offering exclusive options and approaching leased-vehicle drivers. By getting the order in advance, the car can be on the lot when a lease expires, Rich Brekus, general manager of sales for North America, said in an interview.

BMW already offers individualized options, including $650 ceramic knobs for the air vents and iDrive entertainment system on the 7-Series. A heads-up display, which projects information such as vehicle speed on the windshield, goes for $1,300. The 5- Series can be equipped with gearshift paddles on the steering wheel for $500.

The current X3 is offered in a range of 10 exterior colors, including Mineral Green and Vermilion Red, and seats are available in four fabrics including Sand Beige leatherette. There are three choices for the wood trim.

“When customers build the cars themselves, we find there’s less discounting, and that’s one of the biggest challenges this industry faces,” Brekus said by telephone. He declined to say what percentage of BMW’s U.S. sales are customized.

Discounting

BMW, which aims to overtake Lexus as the leading luxury brand in the U.S. by 2012, is among the most aggressive discounters in the battle for market share. The Munich-based automaker’s incentives averaged $4,544 in the first four months of 2010 compared with $1,460 for Lexus and $3,398 for Daimler AG’s Mercedes-Benz, according to Santa Monica, California-based Edmunds.com.

The maker of BMW, Mini, and Rolls-Royce nameplates is starting the customization program with the new X3 because the shift of the production location reduces delivery time by about three weeks, Brekus said. Waiting time in the U.S. for customized orders from Spartanburg will range from two to six weeks, depending on location, according to BMW.

Drooping Sales

The X3 is also in need of a special lift. Sales in the U.S. have been less than 1,000 for 18 consecutive months, while incentives on the vehicle nearly doubled to $4,097 in April, according to Edmunds.com.

Made-to-order cars will also have to compete with vehicles on dealer lots, which cost money to keep and so may end up being cheaper for the consumer, Anwyl said.

“The problem for BMW is Mercedes or Audi dealers would sell against their built-to-order cars,” he said. “Built-to- order would have to be at a discount to motivate consumers. The personalization aspect can be somewhat overrated.”

Rebecca Lindland, an automotive analyst with IHS Global Insight in Lexington, Massachusetts, said she took delivery of a BMW X5 three weeks after ordering through a New Hampshire dealership. “It’s a different mentality and it can be more of a risk for a non-premium brand,” she said.

Volkswagen AG’s Audi, which aims to more than double U.S. sales to 200,000 vehicles by 2018, has its “Exclusive” program that allows customers to choose colors and fabrics that aren’t on the brochure. Last month, more than 14 percent of the Audis arriving at U.S. dealerships were pre-ordered, compared with 5.4 percent a year earlier, the company said.

Dealers

“You can even match the color of your favorite shirt,” said Jeff Kuhlman, a spokesman for Audi in Herndon, Virginia.

Allison Takahashi, a spokeswoman for Lexus in Torrance, California, said its LS 600h L sedan and LFA sports coupe are only for preorder. Lexus has no incentive programs in place for these special orders, she wrote in an e-mail.

BMW fell 90 cents, or 2.3 percent, to 38.62 euros in Frankfurt trading. The stock has increased 21 percent this year, outperforming Volkswagen’s 8.8 percent jump. Toyota has dropped 9 percent in Tokyo.

Some dealers are increasingly embracing the concept of built-to-order. Penske Automotive Group Inc., which imports the Smart mini-car to the U.S. for Stuttgart, Germany-based Daimler, took orders to help it underpin the U.S. launch of the urban two-seater in 2008.

Customized orders will help improve customer satisfaction and reduce the amount of inventory a dealer needs to carry, said Tony Pordon, a spokesman for the Bloomfield Hills, Michigan- based auto dealer. Penske owns 10 BMW dealers in the U.S., 15 in the U.K., and two in Germany.

“The only drawback is that consumers will need to wait for their vehicle to be built instead of selecting one from the lot and driving it home that evening,” Pordon said. “When people decide they’re going to buy a car, they usually want it now.”

LINK: BMW Tries to Convert ?Impulsive? Americans to Orders (Update2) - Bloomberg.com

Rick

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